A Trump victory could spell trouble for Mexican investments, economy

Stock market analysis firm Zack’s Research writes that Mexican financial assets have become more volatile as the latest polls tracking the upcoming U.S. presidential election have shown Democrat candidate Hillary Clinton and Republican nominee Donald Trump are engaged in a neck-and-neck fight. We believe this volatility may heighten as the election is just around the corner. Historically, this is the first time that the Mexican financial sector and its overall economy are so closely related to the outcome of the U.S. presidential election.

Why Mexico?

Mexico came to limelight of this year’s U.S. presidential election once republican contender Trump makes this country a prime target. Trump has accused Mexico of taking away jobs from Americans. He questioned the viability of the landmark 1990s trade agreement between the U.S., Mexico and Canada. He said that he will renegotiate the North American Free Trade Agreement, commonly known as NAFTA, or pull out of it, and build a wall along the U.S.-Mexico border to curb illegal immigration.

Mexico’s Stock Exchange building. (PHOTO: elfinanciero.com)

This would hamper the trade relationship between Mexico and the U.S., and hurt Mexico’s exports. Notably, 81% of its exports go to the U.S. that makes up for more than one-third of Mexico’s GDP. The renegotiation might impose a 35% tariff on the import of Mexican goods, like cars, to the U.S. Trump’s policies could prove a nightmare for the Mexican economy with less employment, less income, lower exports, and thus a weakening currency.